August 30, 2008
Alitalia Files for Bankruptcy Protection
ROME -- Alitalia said Friday it has sought bankruptcy protection, taking the first step in a plan to reshape Italy's unprofitable and debt-laden national carrier.
The company said in a statement that its board had asked the government to appoint an administrator and had declared insolvency to a Rome court.
Alitalia has been losing some $3 million a day -- hurt by labor unrest, competition from budget airlines and high fuel prices. Its shares have been suspended from trading since June.
The airline said its net debt at the end of July amounted to 1.172 billion euros ($1.73 billion). The figure does not include a 300 million euro ($442 million) loan that the government granted in April to keep the cash-strapped carrier flying.
Following Alitalia's announcement, the government named Augusto Fantozzi, a tax law expert and former finance minister, as the company's administrator.
Fantozzi served as economy minister in 1995 in a government headed by Lamberto Dini and then as minister of foreign trade in Romano Prodi's Cabinet a year later.
The government and others involved have been secretive about the negotiations to save the state-run carrier, but the plan reportedly calls for the breakup of Alitalia into two parts.
The profitable assets would be taken over by a group of Italian investors ready to inject 1 billion euros ($1.5 billion) into the airline under the reported plan. The other assets will be spun off into a separate company for liquidation.
The plan is the latest attempt by the government to sell its 49.9 percent stake in the loss-making airline following a failed bid by Air France-KLM earlier this year.
On Thursday, Premier Silvio Berlusconi's government approved key changes to the country's bankruptcy-protection law, tailoring it to Alitalia's immediate needs.
The decree passed at a Cabinet meeting allows for the breakup of the company and gives the administrator the power to sell off assets through private or exclusive negotiations.
It also makes exceptions to Italy's antitrust regulations, a move that could pave the way for reported plans to combine Alitalia with Air One, Italy's second largest airline.
A group of 16 Italian businessmen has stepped up to invest in the new company, headed by Roberto Colaninno, the chairman of motorcycle maker Piaggio. He is expected to become chairman, while Rocco Sabelli, a veteran executive who has often worked with Colaninno, is the designated chief executive.
Air One's head, Carlo Toto, also figures among the group of investors.
The possibility of a combination of the two biggest Italian airlines has raised antitrust concerns, especially because the resulting company would have a virtual monopoly on the highly traveled Rome-Milan route.
The plan could also raise concerns at the European Union, which is already investigating whether the government's loan in April broke EU rules that limit public assistance for companies.
In Brussels, EU officials said Thursday they had received a draft plan and that they were examining it.
Saving Alitalia has been a priority of Berlusconi's government since he won April elections and returned to power. The conservative leader has stressed that the new Alitalia would remain in Italian hands, and that any foreign airlines would only be allowed to acquire a minority stake in it.
The government has been trying to revive talks for an international partner for the revamped Alitalia, which is expected to be a leaner company with a reduced but younger fleet, and fewer personnel that will work longer hours.
Colaninno said in an interview published Friday that Air France- KLM and Germany's Lufthansa AG are both negotiating for a possible partnership with Alitalia and are on equal footing.
"We are negotiating with both, and they're going at the same speed," he told La Repubblica daily, adding that a foreign partner is "indispensable" for the Italian carrier.
Lufthansa declined to comment on Friday, while Air France-KLM has confirmed that it wishes to "remain a strategic partner of Alitalia."
The Franco-Dutch carrier tried to take over the airline earlier this year in a bid that was opposed by unions and Berlusconi.
Corrado Passera, the CEO of the Italian bank Intesa Sanpaolo, which is acting as the government's adviser for Alitalia, said Friday it would take about a month to see if the plan could go ahead.
Passera told the ANSA news agency that Intesa Sanpaolo itself would invest 100 million to 150 million euros ($150-220 million) and take a 10 percent stake in the new company.
Passera also was quoted as saying that the deal for the creation of the new Alitalia would be conditional on approval by unions.
Reports have said the plan to save Alitalia would include between 5,000 and 7,000 layoffs, from a work force of about 20,000. The laid- off workers are expected to be enrolled on welfare programs for up to seven years.
In a statement Friday, the nine unions representing Alitalia workers said they wanted a say on the entire plan, not just on the labor aspects. A meeting between unions and the government is scheduled for Monday.
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